The effects of Spain’s bad loans are still being felt in the banking sector, with three of the country’s largest lenders revealing that the Spanish property crisis is continuing to eat into profits. In the final quarter of 2012, Banco Popular, Caixabank and BBVA reported significant net losses. A net loss of €2.46 billion (£2.12 billion) for the year was noted by Banco, down from a €480 million (£415 million) profit in 2011. This is the largest drop on record for the bank. Caixabank recorded a 78.3 per cent loss, leaving profits at €229 million (£198 million) for the year, while BBVA had a net profit fall of 44 per cent year-on-year to €1.67 billion (£1.44 billion).
These losses will not be welcomed and are indicative of the damaging effect of the Spanish property market crash. However, it is believed that the rate in which bad loans are increasing is slowing, which is good news for the sector. In fact, it seems as though confidence is slowly returning to sector following the country’s request for a €40 million (£34.5 million) European bailout last year. Credit conditions are beginning to ease for lenders and demand is increasing for certain real estate segments.
Even foreclosed properties experienced a year-end rush in 2012, with Bankia announcing that it raised €550 million (£475 million) from selling such units, Reuters reported. This is 19 per cent more than in 2011 and has been attributed to tax breaks currently on offer in Spain. In December alone, Bankia independently sold 1,100 foreclosed properties, which is 70 per cent more than in November. However, to clear distressed real estate off the books, banks are being forced to offer units at significant reductions of between 40 and 60 per cent.
For those looking for Spanish real estate, this creates a wealth of opportunity, enabling those previously unable to afford property to invest overseas. However, the Financial Times claims that the market isn’t out of the woods just yet and banks will face further challenges. The Spanish economy looks set to contract sharply this year and financial institutions must ready themselves for the fallout.